Orientation of market allocation in China´s financial development

This article uses the provincial panel data in China to test the functions of the country´s financial system. Results show that after the reform of financial liberalization, the financial system has begun to play its role in resource allocation, and has promoted economic growth through both capital accumulation and technical progress. However, the financial marketization degree is not high and technology absorption capacity measured by financial development level remains poor. Thus the financial system did not contribute to the promotion of technical progress and economic growth.